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Erickson Wins 5-Year Navy Contract

Zacks Equity Research

An Erickson Air-Crane Inc. (EAC) unit, Evergreen Helicopters International, received a new five-year contract to provide comprehensive replenishment and logistics services to Military Sealift Command.

This firm-fixed price contract will provide replenishment support to the U.S. Fifth and Seventh fleet. These operate largely in the Indian Ocean and Pacific areas and the company's support comprises both sea-based and shore-based support using helicopters. The aggregate value of the contract is $36.6 million and has one base year of performance with four option years.

Erickson-Air Crane has been known to offer aircraft services to the U.S. military over the past four decades. The key factor that drives Erickson-Air Crane’s business is its diversified nature of operations. From transport to the energy sector, the company has been successful in spreading its business capabilities in the U.S. as well as in the international market.

The buyout of Evergreen Helicopters from Evergreen International Aviation, Inc. is considered to be an important catalyst for Erickson-Air Crane’s growth prospects. This high-quality acquisition boosted the company’s industry position and allowed it to secure a slew of domestic and overseas contract extensions in the first half of 2013. Evergreen Helicopters is a diversified provider of air transport services worldwide for cargo and personnel to government and commercial customers.

Again, Erickson Air-Crane entered into a definitive purchase agreement with HRT Participações em Petróleo S.A. (“HRT”) to acquire its aviation services division, Air Amazonia Serviços Aeronauticos Ltda. (“Air Amazonia”). Also, per the agreement, the company will take possession of a fleet of six aircraft and ground facilities of HRT. This acquisition will help the company to continue to expand in the South American oil and gas markets.

Despite Erickson Air-Crane’s judicious acquisitions as well as contract wins, the company is vulnerable to defense budget cuts and sequestration.

Erickson Air-Crane presently retains a short-term Zacks Rank #3 (Hold). However, other companies in the space that look favorable for the short term include Northrop Grumman Corp (NOC), Lockheed Martin Corp. (LMT) and Huntington Ingalls Industries (HII), all with a Zacks Rank #2 (Buy).

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Read the Full Research Report on HII

Read the Full Research Report on EAC

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